May 2018 Volume LIII Number 3

Treloar & Heisel

The "G-word"
In a world with few certainties, here’s a product that delivers some serious guarantees…

By Treloar & Heisel, Inc.
Part two in a series of articles about whole life insurance.

Earlier in this series, we introduced the concept of permanent life insurance. If you’ve ever heard of whole life insurance, then you’ve run across permanent insurance. Provided you pay your premiums, whole life insurance only expires when you expire. Like all life insurance, the death benefit is paid to your designated beneficiary (-ies) upon your death.

In our view, the best thing about whole life insurance is that it’s a multi-dimensional asset. Call it the "Swiss Army Knife" of financial services. It’s designed to serve as life insurance – and then some. Keep in mind that when we refer to whole life insurance, we mean participating insurance with a mutual company. This is an important distinction to make. A mutual company is owned by its policyholders, and any earnings the company achieves are subsequently shared with the policyholders in the form of dividends.

In a world where guarantees are hard to come by, having some certainty is quite valu- able. Not only does whole life insurance have death benefit protection, there’s also a savings component, which provides one-of-a-kind benefits. The savings component of whole life insurance provides some fundamental interest rate guarantees, and a plan to participate in the earnings of a large company.

Today, we will highlight some of the typical guarantees of a whole life insurance policy with a participating mutual company:

Guarantee #1: Death benefit protection
Whole life insurance ensures a guaran- teed death benefit, which means that your loved ones will receive a lump sum of money regardless of how long you live.
Guarantee #2: Guaranteed premiums
Once you purchase your life insurance policy, your premiums will remain the same – for the life of the contract. As you age, and if your health deteriorates, no one can raise your premiums. In contrast, a term life insur- ance policy may not provide such a long-term guarantee.

Guarantee #3: Guaranteed cash values
Unlike term insurance, with whole life insurance, the policy builds cash value over time. You may choose to use those funds* to help pay for college, supplement your retire- ment income, or for emergencies.
Guarantee #4: Guaranteed in the event of disability and long term care (via riders)
Through the activation of additional, optional features known as riders, your whole life insurance policy can be enhanced to stay in force even if your financial ability to pay premiums is compromised due to health reasons. Think about it as "insurance for your insurance." There are riders that will allow your premiums to be paid in the event of your disability or need for long term care.

In today’s financial product marketplace, there are few products that offer guarantees. A handful of products offer guarantees of principal plus earnings, and virtually no other product offers as many guarantees as whole life insurance. The uniqueness of this insurance product is most pronounced when it is compared to its cheaper alternative, term insurance. Term life insurance only pays if the insured dies within a certain period of time, and it should be used to supplement a whole life insurance policy.

Our conclusion is that if more people understood the value, they wouldn’t mind the price! We hope this article helped to shed light on some of the benefits of whole life insurance. If you are in the market for life insurance, please remember to work with a knowledgeable and experienced advisor who is both familiar with the marketplace, and the different nuances of the product.

*Access to cash values through borrowing or partial sur- renders will reduce the policy’s cash value and death benefit, increase the chance the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured.